Tinubu’s tax reforms ‘ll reduce burden on 90% of Nigerian workers – Presidency

Taiwo Oyedele, Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, has said that the tax reform bills proposed by President Bola Tinubu will reduce the tax burden on 90% of Nigerian workers, both in the public and private sectors.

Speaking on Wednesday when he appeared before the Senate during a plenary session, Oyedele explained that the reforms would exempt 30% of Nigerians earning between N50,000 and N70,000 monthly from paying tax, noting that the current tax system had placed a heavy burden on them.

He urged the Senate to consider passing the tax bills as it would usher in a tax administration that would boost Government revenue while also ensuring that Nigerians, especially the indigent are not burdened. Oyedele noted that Nigeria currently has one of the worst tax administration system globally.

“We need to protect even the low middle income earners. These proposals, if approved by the Senate, will reduce the tax on 90% of our workers, both in the private and the public sector, and it will exempt more than 30% of our citizens who earn minimum wage, around N50,000 to N70,000 Naira. Then the remaining 10% who are not so poor will now pay a little bit more”, he said.

About two months ago, President Tinubu sent four tax bills to the National Assembly for approval which had stirred controversy, particularly regarding the revenue-sharing formula. The bills are the Nigeria Tax Bill 2024, the Tax Administration Bill, the Nigeria Revenue Service Establishment Bill, and the Joint Revenue Board Establishment Bill.

Northern governors have strongly opposed the proposed changes to the revenue-sharing formula, proposed in Tax Bill 2024 saying it does not align with its interest.

The Bill seeks to change the sharing formula of the Value Added Tax by reducing the federal government’s share from 15% to 10%. However, the bill includes a caveat that the allocation among states will factor in the derivation principle.

In his presentation at the Upper Chamber, Oyedele said those earning N100 million monthly would pay 25% of their income as tax, a reduction from 30%.

On the issue of revenue sharing formula Value-Added Tax, Oyedele clarified that the reform bills prescribed that every state would receive credit for consumption within their territory and that the State Government would only have power to collect sales tax, leaving the tax on import and international services for the federal government.

“Our proposal before you is that going forward, if we have your approval for the bills, every state will receive credit for the consumption within their territory”, he said.

The tax committee chairman cited the example of the United State of America where State Governments receive tax on only sales tax and do not have constitutional power to collect tax on import and international services.

“So every state will get credit for the economic activities within their jurisdiction. We believe that once that correction has been done, we should then allow states to keep more of the economic activities that they have generated within their jurisdiction.

“One, because it is fair to do so. Number two, to discourage any state from going to the Supreme Court to get a judgement that they want to administer VAT on their own, which is not what we want”, he said.

Oyedele explained that the tax reform bills would review the percentage formula for sharing VAT by the Federal, State and Local Governments.

Under the current system, the Federal Government receives 15%, the States 50%, and Local Governments 35%. The proposed bills would revise this formula to allocate 10% to the federal government, 55% to the states, and 35% to local governments. Furthermore, 60% of the revenue allocated to states and local governments would be distributed based on derivation.

Oyedele said the distribution according to the bills would be distributed with equality of 20% and population of 20%.

According to him, the Bill prescribes that 5percent of the total amount available for distribution to states shall be applied to ensure that no state receives less than the amount it would have received under the distribution formulas contained in the repealed VAT Act LFN, 2004.